Michael Reddell: Oh, what a tangled web

Oh, what a tangled web we weave, When first we practice to deceive - from Marmion, by Sir Walter Scott.

Those were the words that sprang to mind on Friday evening when I heard the news that Neil Quigley had finally resigned as board chair (and board member) of the Reserve Bank. There had been more than enough in his conduct over recent years, and in what he tolerated from Orr, that Quigley should have gone long ago – and certainly shouldn’t have been reappointed by Willis last June – but had it not been for the repeated and sustained efforts of mislead the public over the circumstances of Orr’s departure no doubt he’d have seen out his term (which expired 30 June 2026).

Michael Reddell: Reserve Bank meeting the PM

There has been a flurry of coverage in the last couple of days after the Prime Minister told an interviewer yesterday not only that he thought the Reserve Bank should have cut the OCR by more/earlier, but that he had made this point to the Governor in a meeting with the Bank before the final OCR decision was made last week.

Michael Reddell: One more Treasury OIA about RB spending

All the interest in the Orr-departure story – the background, and the subsequent and ongoing efforts to mislead the public by the Board and the temporary Governor – seems to now centre on the Ombudsman. Various people, including me, have appealed the Bank’s OIA obstructionism on specific requests and the Ombudsman seems to be pursuing the issue reasonably expeditiously.

Michael Reddell: One in five roles could go at the Reserve Bank

That is the headline in a story in The Post this morning. After inquiries from Post journalists a Reserve Bank spokesperson said that final decisions on organisational change, advised to staff last week, would mean a net loss of 142 jobs (35 of which were currently vacant; presumably the Bank has had some sort of hiring freeze in place for some months now).

Michael Reddell: Still waiting for a Governor

Today, 5 August, is five months since the shock resignation – or, as now seems much the most likely, engineered exit – of the then Governor of the Reserve Bank, who disappeared from office that very day, getting generously paid for several more weeks but not working until the official date his resignation became legally effective, 31 March.

Michael Reddell: Productivity growth languishing

I hadn’t had a look for a while at the OECD labour productivity (real GDP per hour worked) data, but the release of the latest OECD Economic Outlook the other day prompted me to spend some time in the (less user-friendly than it was) OECD database.

Michael Reddell: The (deeply underwhelming) Budget

There were good things in the Budget. There may be few/no votes in better macroeconomic statistics and, specifically, a monthly CPI but – years late (for which the current government can’t really be blamed) – it is finally going to happen.

Michael Reddell: Fiscal starting points

Not that long ago, New Zealand’s fiscal balances looked pretty good by advanced country standards. Sure, the fiscal pressures from longer life expectancies were beginning to build – as they were in most of the advanced world – but in absolute and relative terms New Zealand still looked in pretty good shape.

Michael Reddell: Ministers of Finance

No, nothing so serious as fiscal policy.

I saw this morning this chart in a tweet from a Canadian economics professor (prompted by the new ministerial appointments in Canada).

Michael Reddell: Bad advice on public sector discount rates

A couple of months ago now I wrote a post about the new set of discount rates government agencies are supposed to use in undertaking cost-benefit analysis, whether for new spending projects or for regulatory initiatives. The new, radically altered, framework had come into effect from 1 October last year, but with no publicity (except to the public sector agencies required to use them). The new framework, with much lower discount rates for most core public sector things, wasn’t exactly hidden but it wasn’t advertised either.

Michael Reddell: A pre-Budget speech

In a pre-Budget speech this morning the Minister of Finance announced that this year’s operating allowance – the net amount available for new initiatives – was being reduced from $2.4 billion to $1.3 billion (speech here, RNZ story here). Operating allowance numbers in isolation don’t mean a great deal (what happens to the rate of general inflation matters a lot) but a cut like that, at the very end of the Budget process, can probably be taken at face value. On its own, it is equivalent to about a quarter of a per cent of GDP.

Michael Reddell: Fiscal failure

The IMF’s twice-yearly World Economic Outlook and Fiscal Monitor publications have come out in the last couple of days.

If there is gloom in the GDP numbers (eg this chart for the advanced countries, and we don’t score a lot better on the comparable one for the 2019 to 2025 period which encompasses the whole Covid and inflation/disinflation period), much about that is outside the direct or near-term control of  any particular government.

Michael Reddell: Spin (and obfuscation)

I came in this morning after doing some chores and looked quickly at Twitter before unpacking the groceries. Someone was retweeting a Radio NZ story with the headline “Reserve Bank’s budget to be slashed by 25%”. Wow, I thought, the Minister of Finance has really delivered this time. And then got on with putting the groceries away, relieved that the story I’d heard last week, that the final agreement hadn’t cut future spending much and wasn’t unduly bothering the Bank’s senior management, seemed not to have been true.

Michael Reddell: What was the story re Orr’s resignation?

It is almost six weeks since the shock announcement early on the afternoon of Wednesday 5 March that the Governor of the Reserve Bank, Adrian Orr, was resigning effective 31 March, and that in fact he had already left and an acting Governor was already in place. Orr had been (controversially) reappointed in late 2022 to a second five-year term that still had a little over three years to run.

Michael Reddell: Tariff madness and monetary policy

We’ve seen this morning the latest step up in the Trump-initiated trade war, with the additional 50 per cent tariffs imposed on imports from China. If the tariff madness persists – but in fact even if were wound back in some places (eg some of the particularly absurd tariffs on supposed US allies in east Asia, or 48 per cent tariffs on Madagascar’s vanilla) – it is going to be extremely damaging to global economic activity in the (probably protracted) transition.

Michael Reddell: Reserve Bank, bank capital etc

Things seem to be at a pretty low ebb in and around the Reserve Bank. There was, in particular, the mysterious, sudden, and as-yet unexplained resignation of the Governor (we’ve had four Governors since the Bank was given its operational autonomy 35 years ago, and only two have completed their terms and left in a normal way, which must be some sort of unwanted advanced country record). Having slimmed down the bloated number of Orr’s deputies by one last year, another of them quietly resigned and left last month on (apparently) short notice and no specific job to go to. Of those who remain, two are (at best) ethically challenged and one is simply unqualified for the job she holds.

Michael Reddell: Not much parliamentary scrutiny

This was the post I was planning to write this morning to mark Orr’s final day. That said, if the underlying events – deliberate attempts to mislead Parliament – were Orr’s doing, the post is more about the apparent uselessness of Parliament (specifically the Finance and Expenditure Committee) in holding him and the rest of the Bank (other MPC members, Board) to account. This is just one small example.

Michael Reddell: On the way ahead

In my post last Thursday I offered some thoughts on changes that should be initiated by the government in the wake of the Governor’s surprise resignation. (Days on we still have no real explanation as to why he just resigned with no notice, disappearing out the door and (eg) leaving his international conference in the lurch, but this post is entirely forward looking.) Here I want to elaborate on three points, having benefited from a few days to reflect and a few useful conversations/exchanges:

Michael Reddell: A Letter

After the Reserve Bank’s appearance on 20 February at the Finance and Expenditure Committee (the Governor, his macro deputy Karen Silk, and his chief economist Paul Conway) on the previous day’s Monetary Policy Statement, I wrote a post here about it, focused on a number of areas in which Orr, either actively abetted or silently accompanied by his senior colleagues, had been stringing along or actively misleading (or worse) the Commitee. The post was headed Orr at it again, a reminder that there had been all too many such cases from the Governor over recent years – mostly misleading FEC (a rather serious matter) but also not infrequently any media outlets that ever posed slightly awkward questions. It is a long list and I won’t bore you with details (you can search: Google and “croaking cassandra, Orr, misleading” appears to work well).

Michael Reddell: $11 billion and out

I’d been thinking last week of writing a post looking ahead to the end of Adrian Orr’s term (due to have run until March 2028) and offering some thoughts on structural changes the government should be looking to make, to complete and refine the Reserve Bank reform programme kicked off by the previous government in 2018. Some of that is now overwhelmed by events, but the importance of the issues – and the medium-term opportunities to deliver a better central bank – hasn’t. So although I will offer a few thoughts at the end of this post on yesterday’s shock news, and the unsatisfactory handling of it, and perhaps even fewer on Orr’s overall tenure, first I’m going to focus on the future.